Argentina’s default: here’s what’s happening

Welcome to #GrieFault day. That’s twitter’s hashtag for the Argentine technical default, caused largely by a series of court rulings by U.S. federal court judge Thomas Griesa, which was triggered this afternoon. That is to say that the ratings agency S&P cut the country’s credit rating to selective default. The country’s representatives are still negotiating with bondholders in Manhattan as of this writing. This was the story yesterday:

After missing an interest payment on its bonds on June 30 (previous coverage in the saga here and here), the country had a 30 day grace period to reach a settlement with its holdout creditors — mostly the hedge fund Elliott Management — in order to avoid default. That grace period is up Wednesday.

As Matt Levine points out, Argentina is obligated to pay today in all of the different places it has bondholders (there are peso, dollar, euro, and yen-denominated bonds). Because of time zone complications, Argentina is now technically in default (according to one credit agency), but the details are unclear. The important point is negotiations are ongoing. Here’s what we know about those, according to various Reuters stories:

Last night the country’s economy minister, Axel Kicillof, showed up in Manhattan to finally have those talks they were ordered to have roughly 30 days ago. It seems Argentina has something of a plan, wherein a consortium of Argentine banks scoops up the debt held by the holdouts. A senior banking executive familiar with the offer told Reuters today that “the idea is to sit down with the funds and buy all their debt. We have to negotiate the final amount, the terms and how payment will be made.”

Another Reuters report confirms that “negotiations are now revolving around how much local banks need to deposit as a goodwill gesture to give Adeba time to negotiate a way to pay holdouts themselves.”  The banks would presumably be much more amenable to the plight of the Argentine government, which currently doesn’t have the money to cover its outstanding bonds in the event of a default, largely (the government thinks) because of the Rights Upon Future Offers (RUFO) clause on its bonds.

Joan Magee and Davide Scigliuzzo explain Argentina’s argument: The RUFO clause “prohibits it from voluntarily paying the holdouts, who are demanding full payment on their bonds, better terms than the 25 to 29 cents on the dollar the other investors accepted … Argentina fears that it may face billions of dollars of claims from investors who accepted the restructuring should it pay the holdouts in full.”

This would be Argentina’s second default in 12 years, and one in a series of economic crises over the last century. For the truly nerdy (like us), Reuters has compiled a chronological history of major problems in the Argentine economy.

Reuters is reporting that Argentina’s debt mediator, Daniel Pollack, says that Argentina “will imminently be in default.” The full statement from Pollack is here. During his press conference, Kicillof dug his heels in. He didn’t reach an agreement with what Argentina calls the “vulture funds” after offering them the same terms as previous debt swaps. He repeated much of what Argentina has said in the past: Argentina paid its June 30 interest payment (Judge Griesa ordered Bank of New York Mellon to return it), it doesn’t make sense to have a deal with the hedge funds and not other holdouts, the country will make every effort to continue to service the exchanged debt. Kicillof also says he will return to Argentina today

Source :  http://blogs.reuters.com/counterparties/2014/07/30/argentinas-deafult-heres-whats-happening-today/

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Richard Branson :: My illustrated top 10 tips for success

Delighted to see so many people sharing my top 10 tips article on the BBC. One of the most rewarding parts of success is being able to share what you have learned to try to help others. 

Like many people, I learn better through experience than theory. Also, if presented with huge reams of text, I tend to lose interest quite quickly. Lots of us are more visual learners, so I wanted to expand my 10 tips with some imagery to illustrate the points. Hope you enjoy them, and let me know your own top tips for success.

http://www.virgin.com/richard-branson/my-illustrated-top-10-tips-for-success

and on BBC

http://www.bbc.com/news/entertainment-arts-26575792

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BIG MARKET NEWS WEEK 28 JULY – 1 AUG 2014

   United States Monday, July 28, 2014 16:00  
 

USD Pending Home Sales (MoM) (Jun)
United States

 

 Tuesday, July 29, 2014

 

16:00

 

 
USD Consumer Confidence (Jul)
 
    Germany

 

 

Wednesday, July 30, 2014

 

14:00

 

 
 
EUR Harmonised Index of Consumer Prices (YoY) (Jun)Preliminar
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USD ADP Employment Change (Jul)
  United States

 

Wednesday, July 30, 2014 14:30

 

 
USD   Gross Domestic Product Annualized  (Q2)Preliminar
 

United States

 

Wednesday, July 30, 2014

 

14:30

 

 
USD Gross Domestic Product Price Index (Q2)Preliminar
 

 

 

   United States  

Wednesday, July 30, 2014

 

 

20:00

 

 
USD Fed Interest Rate Decision
 

United States

 

Wednesday, July 30, 2014

 

 

20:00

 
USD Fed Pace of MBS Purchase Program
 

 

 

United States

 

 

 

Wednesday, July 30, 2014

 

 

 

 

20:00

 
 

USD Fed Pace of Treasury Purchase Program
Australia  Thursday, July 31, 2014 03:30

 

 
 
AUD Building Permits (MoM) (Jun)
 Germany  

Thursday, July 31, 2014

 

 09:55  
  EUR Unemployment Change (Jul)
Germany  Thursday, July 31, 2014

 

 

 09:55    

EUR Unemployment Rate s.a. (Jul)
 European Monetary Union Thursday, July 31, 2014

 

 11:00  
EUR Consumer Price Index – Core (YoY) (Jul)Preliminar
 Eurpean Monetary Union Thursday, July 31, 2014

 

 11:00  
EUR Consumer Price Index (YoY) (Jul)Preliminar
 Canada  Thursday, July 31, 2014

 

 14:30    

CAD Gross Domestic Product (MoM) (May)
 China  Friday, August 1, 2014

 

03:00    

CNY NBS Manufacturing PMI (Jul)
   Australia   Friday, August 1, 2014

 

03:30  
AUD Producer Price Index (QoQ) (Q2)
China Friday, August 1, 2014

 

   03:45    

CNY HSBC Manufacturing PMI (Jul)
 
Japan Friday, August 1, 2014

 

 05:30  
JPY Bank of Japan Governor Kuroda Speech
 United Kingdom Friday, August 1, 2014

 

 10:30  
GBP Markit Manufacturing PMI (Jul)
United States Friday, August 1, 2014

 

 14:30  
 

USD Unemployment Rate (Jul)
United States  Friday, August 1, 2014

 

14:30  
 
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BIG MARKET NEWS WEEK 14 JULY – 20 JULY 2014

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Australia

 

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AUD RBA Meeting’s Minutes
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Tuesday, July 15, 2014

 

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USD Retail Sales (MoM) (May)
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USD Retail Sales ex Autos (MoM) (Jun)
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NZD Consumer Price Index (YoY) (Q2)
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GBP ILO Unemployment Rate (3M) (May)
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USD Producer Price Index (MoM) (Jun)
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Business Adventures: Twelve Classic Tales from the World of Wall Street

In 1969, John Brooks published “Business Adventures,” his collection of New Yorkerbusiness stories—“Twelve classic tales from the worlds of Wall Street and the modern American corporation.” Now, forty-five years later, Bill Gates, in the Wall Street Journal, is calling it his “favorite business book.” (He says it’s Warren Buffett’s favorite business book, too.) It’s easy to see why. Brooks, who wrote for the magazine for more than thirty years, approached business in an unusual way. He had an eye for the technical details that mattered to insiders, but the sensibility of a broad-minded cultural critic.

 

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This is the book that all of us that us who love the wit and wisdom of Mr. Munger have been waiting for.

It’s an absolutely first class production that contains biographical information on Mr. Munger and, most importantly, finally allows all of us to read and study Mr. Munger’s works in one volume.

As an added bonus Chapter 10 includes new material written by Mr. Munger especially for this book.

I strongly recommend that you read and study this book!

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Uber’s Brilliant Strategy to Make Itself Too Big to Ban

The question of how Uber would spend its billion-dollar investment was never really much of a riddle. More rides in more places has always been the plan.

But with its ten-figure cushion, the San Francisco-based ride-hailing startup can be more cunning about how it tries to get huge. Uber wants to grow as quickly it can, and right now, it’s chasing that goal by undercutting the competition on price—even if it loses money in the process. This isn’t a novel approach among tech startups, for which profits aren’t valued nearly as much as popularity. But for Uber, playing in the new realm of the so-called sharing economy, the stakes are higher, since so many entrenched interests are trying to regulate it out of existence. With not just success but survival on the line, Uber has even more incentive to expand as rapidly as possible. If it gets big enough quickly enough, the political price could become too high for any elected official who tries to pull Uber to the curb.

Yesterday, Uber announced it was lowering UberX fares by 20 percent in New York City, claiming the cuts would make its cheapest service cheaper than a regular yellow taxi. That follows a 25 percent decrease in the San Francisco Bay Areaannounced last week, and a similar drop in Los Angeles UberX prices revealed earlier last month. The company says UberX drivers in California (though apparently not in New York) will still get paid their standard 80 percent portion of what the fare would have been before the discount. As Forbes‘ Ellen Huet points out, the arrangement means a San Francisco ride that once cost $15 will now cost passengers $11.25, but the driver still gets paid $12.

http://www.wired.com/2014/07/ubers-brilliant-strategy-to-make-itself-too-big-to-ban

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Is the Fed Behind the Curve?

Imagine Fed Governor Rip van Winkle started his nap at the beginning of 2007 and just woke up to find that inflation is close to the Fed’s objective and the unemployment rate is at its 30-year average. You could forgive him for expecting the federal funds rate to be close to its long-run norm of about 4%, and for his surprise upon learning that the funds rate is at 0.1% and Fed assets are five times where they were when his snooze began.

Is the Fed already behind the curve? Why do policymakers emphasize their expectation that rates will stay low “for a considerable time” beyond October (when asset purchases are expected to halt)? What risks are they seeking to balance?

The most common benchmark for monetary policy is the Taylor rule, which relates the central bank’s policy rate to a combination of deviations of inflation from its target and a measure of resource slack. The modified Taylor rule in the chart below shows that – even ignoring the Fed’s balance sheet expansion – the Fed’s interest rate policy is now unusually stimulative by the standard of the past three decades. [The blue line in the chart is based on the Fed’s preferred inflation measure, the price index of personal consumption expenditures, and the deviation of the unemployment rate from its equilibrium level as a measure of slack.]

U.S. Federal Funds Rate vs. Modified Taylor Rule, 1985–May 2014

Note: The modified Taylor rule shown is R = r + Inflation + 0.5x(Inflation – 2) – (Ut – U*), where: (1) R is the federal funds rate; (2) r is the equilibrium real interest rate (set to 1.75 in line with the midpoint of FOMC members’ projections for the federal funds rate and the inflation rate in the longer run); (3) inflation is measured by the annual percent change of the price index of personal consumption expenditures; (4) Ut is the unemployment rate; and (5) U* is the equilibrium unemployment rate (set to 5.35% in line with the midpoint of FOMC members’ projections for the longer run).

 

See more at: http://www.economonitor.com/blog/2014/07/is-the-fed-behind-the-curve/#sthash.dq1tBL9N.dpuf

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The Epic Story Of How A ‘Genius’ Hedge Fund Almost Caused A Global Financial Meltdown

Twenty years ago, one bond-trading hedge fund grew from launch to over $100 billion in assets in less than three years. It saw yearly returns of over 40 percent. It was run by finance veterans, PhDs, professors, and two Nobel Prize winners. Everyone on Wall Street wanted a piece of their profits.

But by 1998, that firm was primed to expose America’s largest banks to more than $1 trillion in default risks. The demise of the firm, Long-Term Capital Management (LTCM), was swift and sudden. In less than one year, LTCM had lost $4.4 billion of its $4.7 billion in capital.

The entire story is recounted in Roger Lowenstein’s book, When Genius Failed‘, with details on the specific strategies and financial theories employed by Long-Term. It’s an absolute must-read for anyone working on Wall Street, so we’ve summarized the basics for you in ten slides.

This story has all the players — the Federal Reserve, which finally stepped in and organized a bailout, and all the major banks that did the heavy lifting: Bear Stearns, Salomon Smith Barney, Bankers Trust, J.P. Morgan, Lehman Brothers, Chase Manhattan, Merrill Lynch, Morgan Stanley, and Goldman Sachs.

In desperate need of a $4 billion bailout, the crumbling firm was at the mercy of the banks it had once snubbed and manipulated.

Consider this a history lesson.

Read more: http://www.businessinsider.com/the-fall-of-long-term-capital-management-2014-7

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Sales technology will replace 80 percent of the jobs

The growth of Amazon and eBay illustrates that businesses and consumers alike are willing to purchase what they need online rather than from a salesperson.

That trend toward online buying will continue, according to Gerhard Gschwandtner, publisher of Selling Power magazine, and host of the Sales 2.0 Conference in Boston on July 14, 2014. “The integration of Artificial Intelligence into such websites increase the products and services that can be purchased online,” he explains.

Gschwandtner estimates that within 10 years, as much as 80 percent of the sales situations currently handled by salespeople will be handled automatically. He also believes, however, that there will continue to be a need for salespeople in the three following situations:

The customer cannot diagnose his own problem.

The customer cannot define a solution

The customer cannot calculate the ROI

http://www.inc.com

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